While for many, conducting an AGM is a straight-forward process, there are times when contentious issues arise. Set out below are ten tips for managing an effective AGM, and strategies for dealing with anticipated and unexpected issues.
1. Be preparedBy now the location and timing of the meeting will be set (see our earlier post: Time to start thinking about your AGM), but the preparations for the AGM will be ongoing. In addition to addresses from the chairman and CEO, this may include preparing a chairman’s script for the formal part of the meeting and considering responses to key questions that may be asked of directors and management, and potentially the auditor. Hot topics this year include:
- board performance and review processes
- excessive remuneration
- independence of directors - including long standing directors, substantial shareholders or those who have commercial dealings with the company, and
- effective contribution of directors who hold multiple board roles.
2. Review your meeting proceduresIn addition to a refresher on some of the relevant provisions of the constitution; it is worth reviewing some of the general commentaries on procedures for conducting the meeting. For example, the ‘rules of debate’ or procedural motions (see Chapter 11 of The Chairman’s Red Book) can greatly assist in managing questions and discussion at the AGM.
3. Get to the pointThe ‘point of order’ is a particularly useful tool for alerting the chairman to a matter requiring their attention or correction during the AGM. It takes precedence over the discussion taking place and must be ruled on by the chairman immediately. For example, alerting the chairman to a reference to a special resolution which is actually an ordinary resolution.
4. Take the AGM notice as readIt is generally no longer necessary to ask a shareholder to move a resolution and ask another to second the motion. At the beginning of the meeting the chairman should confirm their intention to ‘take the notice as read (unless shareholders object)’. This assists to streamline the consideration of resolutions.
5. Understand the voting exclusionsUnderstand the voting exclusions that apply to each resolution under the Corporations Act, the Listing Rules (if applicable) and, potentially, the company’s constitution. This is likely to be particularly important for the remuneration report (for a listed company) and other remuneration-related resolutions. The chairman should be advised and understand who are the ‘key management personnel’ in the room excluded from voting on such resolutions.
6. Plan for spillsThe remuneration report – although now a familiar process for many in the listed environment, for companies that may face a ‘second strike’ at the AGM, processes should be in place for considering and voting on a spill resolution at the AGM.
7. Disclose proxiesMonitor and disclose proxies as an early warning signal of a potentially contentious item of business. Disclosure of proxy results (e.g. on a PowerPoint) can also assist in reducing protracted debate in the room (e.g. if it is clear that the proxies are overwhelmingly in favour). This may also include engagement with voters in the lead up to the AGM, such as if the usual participants have not returned their proxies. At the same time, knowing who is in the room is also vital, with voting more commonly conducted on a show of hands at the AGM.
8. Be prepared for a pollFor listed companies and large unlisted companies, your share registry should be on hand to assist with a poll, but it is also good for the chairman to understand when it is best for a poll to be called and the key steps involved in the process (e.g. the requirement for an adjournment for the poll to be counted). The timing of the poll is often essential to ensure that shareholder engagement is maintained.
9. Consider the timing of questionsThis may include taking questions as each resolution is considered, during or after the addresses of the chairman and CEO, and/or deferring to the end of the meeting. Although shareholders as a whole should be given a reasonable opportunity to participate and ask questions at the meeting, the chairman should be wary of a shareholder that seeks to dominate proceedings and know when to bring an end to discussions or limit the number of questions. A useful method can be to refer a shareholder to appropriate board members or executives for further clarification following close of the meeting.
10. Consider your compliance requirementsFor listed companies, ensure any presentations or addresses are released prior to the start of the meeting and the results of the AGM made available as soon as practicable following the close of the meeting.
Finally, this year has illustrated the ongoing importance of engaging with institutions and their proxy advisers. This is often left too late and can result in adverse ‘strikes’ on the remuneration report or votes against director re-elections. Post-AGM may be a good time to review any proxy patterns and the quieter time between AGM seasons more conducive to constructive discussion.